COVID-19 RESPONSE EDITION
F2021 Australian Affordable Housing Report STANDARD HOUSE ENVIRONMENTAL SCAN
Australian Affordable Housing Report F2021 1 Contents
01 Introduction...... 3
02 Executive Summary...... 5
03 Section A – The need and market for housing...... 8
04 Section B – The Impacts of a Standard House...... 29 Construction...... 30 Manufacturing Jobs and Housing Innovations...... 33 Retail Impacts...... 36
05 Section C – Housing’s renewed role in building resilient ...... 39 Australian Communities
06 Appendix One...... 51
07 Appendix Two...... 54
Foreword “The concept of the standard house project was developed out of engagement between PowerHousing Australia, Simonds Homes and Community Sector Banking to determine what the impact would be on the residential construction workforce as Australia’s record home building run wound back from 2018. CoreLogic has analysed the first three months of Australia’s economic response to the COVID-19 pandemic with respect to housing data: this is vital to setting a baseline that helps form an understanding of what will happen next. Analysing the forecasts of the next year and recognising the importance of the residential construction workforce in terms of jobs is important, but the value of housing to our communities in this time cannot be understated as an output of this project. As the Standard three bedroom House analysis shows, we see 43 trades and subtrades gain employment when a stand-alone home is built. Our three organisations - one of the nation’s largest residential builders, a supporting lender to the CHP sector and a CHP peak body - all recognise the importance of this to our social and economic resilience as a country. This document really speaks to people’s livelihoods today and considers the homes needed for the lives of generations to come long after we have beaten this crisis.”
Kelvin Ryan – CEO, Simonds Homes Andrew Cairns – CEO, Community Sector Banking (Bendigo Bank)
Byfield, Standard House Design - Simonds Homes House Design Standard Byfield, IMAGE: COVER Nicholas Proud – CEO, PowerHousing Australia HousingFirst
Beyond Housing (VIC)
01 Introduction
There are 25 million people in Australia living in in the COVID-19 environment. A home has emerged over ten million homes: as renters; owner-occupiers as the first principle of stability if individuals (and, with mortgages; and mortgage-free home-owners. therefore, communities) are to be resilient in the face Amongst these, there are 2.1 million people who of ongoing economic and social challenges. own a rental property, which provides a home for Housing is a necessity good – it provides one of the others. During the COVID-19 crisis, most Australians fundamental requirements for Australians - shelter. have been able to retain the security of their housing The COVID-19 crisis has highlighted the lack of situation and have kept a roof over their heads. social and affordable housing provision in Australia The residential property in which an individual or with uncertainty and pressure mounting for renters, household lives has become more than just a home investors and owner occupiers.
Australian Affordable Housing Report F2021 3 If in 2020 you are a renter living in one of the 2.8 Understanding what will be an uncertain and million rental properties in Australia the financial unprecedented change in the housing market, constraints can be challenging and confronting. rental conditions, and wage fragmentation is tough This is particularly the case for casual employees to pick apart. It is unclear whether the JobKeeper and the unemployed, a disproportionate amount allowance, which has been vital in supporting of whom are renters. It is also a challenge for part the Australian economy, will continue past the time and full time workers. There is a big question end of September 2020. Balancing a new market mark over whether rent and living costs will be able equilibrium, with immediate property stimulus, that to be covered in the immediate future economic feeds into longer term new build programs is tricky environment. to get right. A drop to the lowest interest rates in Australia’s The HomeBuilder stimulus program is a first cog history has provided a reprieve for those owner in the wheel of supporting one of Australia’s most occupiers (accounting for around three million crucial industries – residential construction – but dwellings). Of these, 429,000 families with a loan also of creating an environment where this industry have had their mortgages deferred due to COVID-19 can ‘give back’ to the economy in terms of the direct (totalling $153.5 billioni). Others have had payments and indirect (multiplier) effects a boost to residential reduced or held steady for up to six months with an building has on demand, activity and employment on extension of up to an additional four months. the broader economy. For mortgage-free homeowners, the immediate Support for the provision of new social housing challenge with COVID-19 has most likely been the stock is equally important as any policy aimed at impact that the volatility of the stock market has had boosting demand for new private housing stock. on superannuation, and the weekly income derived The twin outcomes of economic and social benefit from that source. The potential to downsize is an derived from boosting new social housing supply is option that may provide livable and practical life not a feature of the HomeBuilder program. However, choice options, but the decline in property values is support for new social housing supply is a vital expected to have a negative impact on the value of component of any recovery plan for the Australian any residential property sale for at the least the next economy. twelve months. Whilst most of the country began easing back To counter the COVID-19 crisis, the Federal COVID-19 restrictions, Melbourne went back into Government allowed for $10,000 of superannuation lockdown in early July. We see that the long term to be accessed in each of the 2020 and 2021 economic impacts and full stimulus required is not financial years for eligible individuals. Long Service clear, but what creates confidence is to see housing Leave has been used and holiday accruals depleted activity locked in. This will be critical to be decided to retain employment. JobKeeper payments have upon in the October and May Federal Budgets well provided financial support for a period to support before the real depth of the trough in housing activity living and housing costs. and social impacts in F2021 and F2022 are realised.
4 PowerHousing Australia City West Housing (NSW)
02 Executive Summary
Residential home building is a major driver of jobs This report presents the outlook for Australia’s and economic activity throughout the Australian residential housing sector, analyses the implications economy. A strong and steady pipeline of new of current forecasts and presents policy options construction keeps people in jobs and helps prevent to address the looming challenges this analysis major price rises that occur when demand outstrips identifies. supply, as has recently been the case. But even more And those challenges are substantial. than that, access to housing that is affordable is the cornerstone of social and economic wellbeing for An existing downward trend in the supply of new Australian families. housing has been exacerbated by the COVID-19 crisis. Once the tail end of the last home building boom
Australian Affordable Housing Report F2021 5 finishes washing through the system, this could lead jobs lost with the unemployment rate reaching to a situation where new home supply effectively falls 7.1 per cent, its highest level since 2001, with real off a cliff, dealing a huge blow to employment and indicators the rate is actually currently closer to businesses along the housing supply chain. In the 11 per cent. At 927,600, the number of officially context of our steeply rising unemployment, this is a unemployed people has reached its highest level blow Australia can not afford. since December 1993, when the country was in the wake of the 1990-91 recession. As demonstrated in this report, every new home that is built provides employment for up to 43 trades and JobKeeper payments for 3.3 million Australians are sub-trades in construction jobs across Australia’s costing up to $10 billion per month and if all were cities, regional and rural areas. It also delivers unemployed the rate would be in excess of 30 per a significant boost to manufacturing and retail cent.ii demand. There are clear buyer demand challenges which Similarly, National Housing Finance and Investment will require layers of residential stimulus policy. Corporation (NHFIC) recently released inaugural The difference between the COVID-19 crisis in research report shows that residential construction 2020 and the Global Financial Crisis (GFC) is that has the second largest economic multiplier of all the the Australian economy is now in recession and 114 industries that make up the Australian economy. the unemployment rate will peak at a far higher level than that reached during the GFC, while a pre- Should Australia’s build rate fall from 230,792 homes existing issue with underemployment is becoming a completed in 2008 to only 120,000 in F2021, which is much larger problem. one possible scenario suggested by the most recent data; this would see the loss of over 4.75 million Boosting and subsequently stabilising the new trade type engagements as a result of the shortfall of housing market beyond the immediate six month 110,000 homes not being built. rental policies/JobSeeker/JobKeeper phase of recovery is crucial to the Australian economy. Social This looming trough in new home construction is housing can act as a shock absorber to fill the equivalent to the ‘valley of death’ faced by Australian primary gap in Federal and State/Territory funding manufacturers. in late 2020. Post the six month JobKeeper support Critically, however, our analysis also demonstrates period, subsidised wage and housing support will be that it is not too late to intervene and alter this needed for people if their job is just simply not there trajectory. Targeted government stimulus that anymore. harnesses the potential of affordable housing as an A positive note for the overall economy is the emerging asset class and the proven capabilities retention of Australia’s AAA credit rating (one of only of the social and community housing sector could 10 countries to do so through the pandemic), which effectively bridge this gap in the market. reflects the stability required to mitigate the crisis. It is broadly expected that while around 180,000 While there are a variety of options to support dwelling completions will be reported for the period the health and welfare of Australians through ending 30 June 2020, residential forecasts of around this difficult period, there is more that will need 120,000 commencements for 2020/21 are being to be done in housing. Mobilising to drive new made. commencements and support the economy through Whilst there has been some stability in house and the Federal Budget, which is less than four months rental pricing over the first quarter of COVID-19 from away will be a given. March to May 2020, there have been over 824,000
6 PowerHousing Australia Housing Trust (NSW)
Social housing is a vital component of overall With elevated annualised ABS Building Approvals still dwelling investment in an industry that accounts for coming through, new build activity can be activated around 5 per cent of GDP. In the last major economic for shovel ready projects that are today ready to get downturn, social housing and affordable stimulus underway, that will flatten the housing supply trough took up a lot of the slack when the market was and mobilise the construction and property industry unable to respond. This meant that the market was at a time when it has never needed it more. quick to reactivate the residential activity when new In particular, this opens the door for Government home buyers were not there. to incentivise the residential sector through longer If there are reports for the first half of 2020 of term tax credits, government subsidies and grant/ elevated stock levels not being sold then social and equity structures which will assist the throughput affordable stimulus may support the market if it is of the rental homes needed today, but also provide not capable of taking-up of any recently completed structure for the ongoing delivery of rental homes residential properties for sale. that will be needed as we come out of the crisis in F2021-F2022. Immediate repairs programs that are brought forward will keep improving the homes of tenants and also stimulate economic activity and jobs.
Australian Affordable Housing Report F2021 7 2020 St Kilda Apartment Sod Turn - HousingFirst (VIC)
Section A – 03 The need and market for housing
In observing first quarter of COVID-19, it is clear the JobSeeker and JobKeeper has seen arrears drop and crisis has unequivocally hammered the Australian Community Housing Providers seeing exceptional economy. Jobs have been lost, forecasts have been tenant payment behaviour. downgraded and expectations are low for economic The wash through of the tail end of the greatest recovery over the next two years. housing boom in Australia’s history will take place A review of the current market for housing, and over the next financial period at the same time as particularly rentals, is not showing the same distress elevated completion levels see the keys handed with a sense of calm sitting in the market. In social over to several hundred thousand new home buyers housing, the additional support of programs such as over the next year. But this won’t last. Much will be
8 PowerHousing Australia signs that a major downturn in delivery has not yet taken hold. This means that an opportunity remains to circumvent the forecasts and deliver a different housing future for Australia.
“The housing sector has a pervasive impact on the Australian economy. It accounts for the bulk of household wealth, and around 6% of employment is related to the residential construction sector.
Southern Cross Housing (NSW) The linkages to the rest of the economy through consumer spending, manufacturing, and the made in this report of the fact that, pre-pandemic, business service sector ensure that housing Australia was already on its way to its most significant cycles are very closely related to the broader downturn in housing supply, but the forecasts as presented predict the downturn will be much more economic cycle in Australia” severe than anything previously forecasted. Felicity Emmett, ANZ Senior Economist, While forecast new build rates are set to decline significantly, the picture to date shows positive June 2020.
A1. COVID Quarter One (Mar-May 2020)
Rental rates On the supply side, anecdotal evidence has emerged of a transition from short term rentals to permanent Rental markets have remained relatively soft over the rentals, as well as a recent construction and past few years with annual growth in capital city rents investment boom that has contributed to higher stock tracking well below the decade average. Based on levels. While supply has risen, demand has been data for the twelve months ending May 2020, capital felt the impact of a combination of stalling overseas city rents were up 0.5 per cent compared with the ten migration and falling foreign student numbers. year annualised growth rate of 1.7 per cent growth. Additionally, the unprecedented plunge in jobs through Across the capital cities, over the twelve months to April has had a larger impact across industry sectors May 2020, Adelaide and Perth recorded the highest such as the food and accommodation services. growth in rents, up 2.2 per cent and 1.8 per cent According to data reported in the April 2020 Financial respectively, while at the other end of the spectrum, Stability Review from the Reserve Bank of Australia rents were down half a per cent in Sydney and 1.3 per (RBA), financially constrained people working in these cent lower in Darwin. sectors are more likely to be renting. The annual change overcompensates for the more From a rental pricing perspective, the highest median recent weakness in rental market indicators. Over the rental rates for a detached house are in Canberra, at two months ending May 2020, rents have fallen across $608 per week, while Perth house rents are the lowest every capital city apart from Perth, where rents (from a of any capital city with a median of $380 per week. low starting base) continued to show a subtle rise. The Sydney shows the highest unit rents, with a median renewed weakness in rental markets can be attributed weekly price of $520, while Adelaide unit rents are the to both a rise in supply and reduction in demand. lowest with a median of $350 per week.
Australian Affordable Housing Report F2021 9 Graph 1: Annual change in capital city rental rates
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
decade average 2.0%
1.0%
0.0%
-1.0%
Jul 14 Jul 19 May 10 Oct 10Mar 11Aug 11Jan 12Jun 12Nov 12Apr 13Sep 13Feb 14 Dec 14May 15 Oct 15Mar 16Aug 16Jan 17Jun 17Nov 17Apr 18Sep 18Feb 19 Dec 19May 20
Source: CoreLogic, June 2020
Graph 2: Changes in rents, 12 months ending May 2020
National 0.9% Combined regionals 2.2% Combined capitals 0.5% Canberra 0.4% Darwin -1.3% Hobart 1.2% Perth 1.8% Adelaide 2.2% Brisbane 0.9% Melbourne 0.7% Sydney -0.5%
-1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5%
Source: CoreLogic, June 2020
10 PowerHousing Australia Dwelling values of growth through the second half of 2019, however values drifted lower in Perth and Darwin; although As indicated, Australian house prices across each both cities started to show a recovery trend towards capital city in Australia since 2009 have had a five the end of the year and through early 2020. year period where house prices grew at over 20 per cent per year on year, far outstripping wages growth. More recently, the trend in housing values has lost momentum. The pace of capital gains was already Whilst record supply of 230,000 home starts were broadly slowing prior to the COVID-19 pandemic, completed at peak annual build rate to exceed as housing affordability became more challenging. population need and underlying market demand, the Conditions slowed more sharply from mid-March as price finally stabilised and then dropped in the major social distancing restrictions were implemented and capitals. borders closed. Housing values were well into a strong upswing Housing values recorded their first month-on- prior to the COVID-19 pandemic. The second half month fall since June 2019 over May, down 0.4 per of 2019 saw capital city home values surge 7.0 cent nationally. Considering the weak economic per cent higher, with significantly stronger growth conditions and heightened uncertainty, the declining in Sydney, where values were up 9.9 per cent over trend in home values looks mild to-date, however the same time frame, and Melbourne where values there could be additional downward pressure on jumped 9.6 per cent. Most of the remaining capital home values later this year as stimulus measures are cities recorded a lower but more sustainable pace tapered or removed and bank leniency policies expire.
Graph 3: Rolling annual change in capital city dwelling values
0.2%
0.15%
0.1%
0.05%
0.0%
-0.05%
-0.1%
May 00 May 05 May 10 May 15 May 20
Source: CoreLogic, June 2020
Australian Affordable Housing Report F2021 11 Graph 4: Change in dwelling values, 12 months to May 2020
National 8.3%
Combined regionals 3.5%
Combined capitals 9.7%
Hobart 6.2%
Perth -2.1%
Adelaide 1.8%
Brisbane 4.3%
Melbourne 11.7%
Sydney 14.3%
-4% -2% 0% 2% 4% 6% 8% 10% 12% 14% 16%
Source: CoreLogic, June 2020
Opening of the Phil Brady Community Garden - Link Housing (NSW)
Dwelling values over the past twenty years Over the past twenty years the median value of a over this period, although inflation in home values capital city dwelling has risen by $462,350, or 252 was much stronger over the first decade (between per cent, with a larger 277 per cent lift in house 2000 and 2010, capital city dwelling values rose values relative to units (+203 per cent). by +155 per cent) than the second (+38 per cent between 2010 and 2020). On an annual compounding basis, capital city home values have been rising by 6.5 per cent per annum
12 PowerHousing Australia Table 1: 20 year property value change
Median dwelling values over the past twenty years
Combined Month Sydney Melbourne Brisbane Adelaide Perth Hobart Darwin Canberra capitals National
31/05/2000 $283,507 $189,872 $144,767 $127,405 $152,406 $107,446 $154,450 $160,861 $183,159 $159,215
5yr change 60.7% 56.1% 12.9% 20.2% 29.8% 6.2% na 13.0% 38.9% 30.2%
31/05/2005 $432,004 $312,104 $304,248 $262,088 $288,646 $255,985 $252,431 $345,878 $329,482 $307,696
5yr change 52.4% 64.4% 110.2% 105.7% 89.4% 138.2% 63.4% 115.0% 79.9% 93.3%
31/05/2010 $502,694 $490,577 $441,843 $380,023 $486,501 $340,167 $496,764 $504,029 $467,689 $423,317
5yr change 16.4% 57.2% 45.2% 45.0% 68.5% 32.9% 96.8% 45.7% 41.9% 37.6%
31/05/2015 $747,010 $543,062 $458,134 $396,735 $521,936 $322,756 $514,978 $509,595 $565,172 $476,769
5yr change 48.6% 10.7% 3.7% 4.4% 7.3% -5.1% 3.7% 1.1% 20.8% 12.6%
31/05/2020 $885,158 $686,798 $508,386 $441,184 $443,669 $486,056 $393,939 $637,279 $645,511 $557,817
5yr change 18.5% 26.5% 11.0% 11.2% -15.0% 50.6% -23.5% 25.1% 14.2% 17.0%
Median house values over the past twenty years
Combined Month Sydney Melbourne Brisbane Adelaide Perth Hobart Darwin Canberra capitals National
31/05/2000 $291,390 $199,041 $144,213 $135,268 $156,535 $109,318 $161,051 $172,740 $180,196 $155,371
5yr change 63.6% 56.5% 12.9% 22.8% 30.3% 5.2% na 20.9% 37.2% 29.1%
31/05/2005 $475,309 $336,233 $318,342 $278,652 $298,315 $264,983 $279,578 $368,381 $341,777 $314,128
5yr change 63.1% 68.9% 120.7% 106.0% 90.6% 142.4% 73.6% 113.3% 89.7% 102.2%
31/05/2010 $558,459 $532,988 $463,212 $401,811 $502,594 $356,965 $533,029 $540,446 $489,650 $433,995
5yr change 17.5% 58.5% 45.5% 44.2% 68.5% 34.7% 90.7% 46.7% 43.3% 38.2%
31/05/2015 $860,788 $619,731 $487,413 $424,858 $548,650 $343,716 $565,860 $552,634 $594,692 $485,568
5yr change 54.1% 16.3% 5.2% 5.7% 9.2% -3.7% 6.2% 2.3% 21.5% 11.9%
31/05/2020 $1,016,726 $809,274 $559,975 $478,294 $461,366 $514,496 $473,861 $716,663 $680,577 $571,999
5yr change 18.1% 30.6% 14.9% 12.6% -15.9% 49.7% -16.3% 29.7% 14.4% 17.8%
Median unit values over the past twenty years
Combined Month Sydney Melbourne Brisbane Adelaide Perth Hobart Darwin Canberra capitals National
31/05/2000 $275,870 $178,693 $146,527 $97,438 $129,242 $98,881 $143,325 $140,193 $191,309 $171,924
5yr change 57.7% 59.4% 12.6% 6.4% 24.6% 9.8% na -0.8% 43.6% 33.8%
31/05/2005 $380,874 $286,347 $255,823 $205,135 $234,242 $218,214 $185,682 $291,200 $302,521 $290,435
5yr change 38.1% 60.2% 74.6% 110.5% 81.2% 120.7% 29.6% 107.7% 58.1% 68.9%
31/05/2010 $457,858 $448,261 $380,773 $314,544 $404,941 $277,132 $415,333 $420,060 $424,942 $397,748
5yr change 20.2% 56.5% 48.8% 53.3% 72.9% 27.0% 123.7% 44.3% 40.5% 36.9%
31/05/2015 $658,616 $478,571 $393,140 $316,634 $444,454 $268,524 $447,450 $402,905 $515,691 $455,513
5yr change 43.8% 6.8% 3.2% 0.7% 9.8% -3.1% 7.7% -4.1% 21.4% 14.5%
31/05/2020 $772,204 $580,009 $388,894 $335,052 $355,576 $403,382 $272,648 $444,292 $580,239 $523,326
5yr change 17.2% 21.2% -1.1% 5.8% -20.0% 50.2% -39.1% 10.3% 12.5% 14.9%
Source: CoreLogic, June 2020
Australian Affordable Housing Report F2021 13 Proportion of homes sold under $400k The past five years has seen a reduction in the under $400k reduced from 35.5 per cent in 2015 to proportion of homes selling at a price point lower 27.7 per cent in 2020, while unit sales under $400k than $400k. Nationally, the proportion of houses sold reduced from 35.8 per cent to 32.0 per cent.
Table 2: Sales by price point, 12 months to May 2020
% sold under $400k Houses Units 2015 2020 2015 2020 Sydney 8.4% 3.6% 12.2% 6.6%
Melbourne 25.4% 2.7% 28.4% 17.8%
Brisbane 31.9% 23.6% 44.2% 52.0%
Adelaide 44.2% 35.9% 75.8% 68.2%
Perth 17.3% 33.7% 37.7% 56.8%
Hobart 61.2% 28.3% 78.6% 51.0%
Darwin 22.3% 29.8% 27.4% 76.4%
Canberra 16.8% 3.6% 44.5% 36.5%
Combined capitals 22.7% 15.0% 26.8% 23.5%
National 35.5% 27.7% 35.8% 32.0%
Source: CoreLogic, June 2020
Perth and Darwin, where housing values have moved $400k comprising the smallest proportion in through a sustained correction, were the only capital Melbourne (2.7 per cent), Sydney (3.6 per cent) and cities to record a rise in the proportion of houses Canberra (3.6 per cent). selling under $400k, while across the unit sector, Every city shows the unit market with more affordable Brisbane can be added to the list along with Perth price points, however Sydney stands out with only 6.6 and Darwin. per cent of unit sales transacting under $400k over Some cities have seen a material reduction in the past twelve months. affordably priced homes, with house sales under
Auctions 70.1 per cent across the combined capital cities. This reflected a market in which housing demand was strong. However, once housing-specific social distancing restrictions were implemented in late March, auctions markets were negatively impacted. With vendors unable to hold open homes or on-site auctions, a large proportion of scheduled auctions were In the four weeks prior to Australia’s 100th confirmed withdrawn from the market, which skewed clearance case of COVID-19, auction clearance rates averaged rates to the low 30 per cent range.
14 PowerHousing Australia Graph 5: Auction clearance rate, combined capital cities
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0 May 08 May 09 May 10 May 11 May 12 May 13 May 14 May 15 May 16 May 17 May 18 May 19 May 20
Source: CoreLogic, June 2020
Graph 6: Auction clearance rate, Sydney and Melbourne
100%
90%
80%
70%
60%
50%
40%
30%
20% n Melbourne n Sydney 10%
0 May 08 May 09 May 10 May 11 May 12 May 13 May 14 May 15 May 16 May 17 May 18 May 19 May 20
Source: CoreLogic, June 2020
Australian Affordable Housing Report F2021 15 House price forecast by capital city CoreLogic and ANZ Researchiii expects a peak-to- Perth market to perform the best with a decline of trough decline of 10 per cent on average across just 2 per cent expected. Prices in Brisbane, Darwin, the capital cities, with the sharpest falls in Sydney, Adelaide and Canberra are all expected to fall solidly. Melbourne and Hobart. ANZ Research expects the
Graph 7: Change in dwelling values, 12 months to May 2020
12 10 8 6 4 2 0 -2 -4 -6 -8 -10 National Sydney Melbourne Brisbane Adelaide Perth Hobart Darwin Canberra
n 2017 n 2018 n 2019 n 2020 (forecast) n 2021 (forecast)
Source: CoreLogic, ANZ Research, May 2020
Access Housing (WA)
16 PowerHousing Australia A2. RESIDENTIAL HOUSING FORECASTS
We learn less than usual from history in the While these numbers present a mixed position for COVID-19 environment. The outlook for housing housing, the initial forecasts tell a different story. starts is very uncertain, as is the case for the broader domestic and global economic dynamic. Key forecasters provide low Recent new home sales fell by 22.8 per cent in the forecasts for new housing delivery two months following the introduction of tough pandemic social restrictions, triggering a wave of HIA F2021 111,510 commencementsvi project cancellations that could derail the economic MBA F2021 115,822 commencementsvii recovery in 2021.iv UBS F2021 100-120,000 commencementsviii Builders and subcontractors were also forced to slash their rates and forgo profits as contract work dries up in the wake of the economic slowdown.v
Graph 8: New residential construction and HIA forecasts Seasonally adjusted
240,000
220,000
200,000
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000 159,820 132,630 162,420 145,260 166,020 185,120 219,480 234,120 221,580 230,480 196,430 160,200 111,510 0
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19* 2020/21*
Source: HIA, May 2020 * Forecast
Australian Affordable Housing Report F2021 17 UBS expects housing starts to fall to around 120,000 commencements per year. The key point here is that in the 2020 calendar year. Housing starts could well new commencements could be activated based on dip below 100,000 in coming quarters, which would Government investment and the intervention that has be the lowest level since 1960. Investment bank UBS been made. has already forecast new housing starts nationally Whilst providing a trough projection, point projections – to fall below an annualised 100,000 in coming of forecasts are much more difficult in the current quarters, which is down to 1960s levels.ix environment as the situation is extremely fluid. The With the release of the HomeBuilder package table developed by respected housing economist and some state stimulus announcements from Harley Dale below provides four distinct scenarios as Tasmania, Western Australia and South Australia, the to where housing starts (and dwelling completions) above forecasts could rise by 15-25,000 new dwelling may end up over the period to the end of 2020/21.
Table 3: New dwelling commencements and completions - scenario analysis
Commencements
Worst Case Low Medium High
Number % change Number % change Number % change Number % change
2018/19 197,000 197,000 197,000 197,000
2019/20 153,600 -22% 153,600 -22% 153,600 -22% 153,600 -22%
2020/21 98,300 -36% 112,000 -27% 127,900 -17% 135,704 -12%
Completions
Worst Case Low Medium High
Number % change Number % change Number % change Number % change
2018/19 215,200 215,200 215,200 215,200
2019/20 182,800 -15% 182,800 -15% 182,800 -15% 182,800 -15%
2020/21 96,345 -47% 96,345 -39% 96,345 -31% 96,345 -27%
Source: HDD Consulting, June 2020
The ‘Worst Case’ scenario presented in the table new home stakeholders such as first home buyers above would take new home building activity to an (FHBs), at least partially offsetting the overall lack unprecedented low. We are looking at a virtually of private demand for new housing which will be unprecedented economic and social crisis, evident for some time to come. including the possibility of the lowest immigration The 2009 Social Housing Initiative and grant boost levels since 1870 (World War One excluded). to FHBs of new homes both played a significant role The ‘Low’ scenario is the most likely in the absence in safeguarding Australia from the most damaging of government stimulus to the new home building impacts of the GFC. While an on-going exodus of sector. The ‘Medium’ scenario presumes some residential investors will now leave a potential gap government stimulus, which we now have, but for FHBs and existing owner occupiers, broader recognises that private demand for new housing may economic constraints mean private sector housing be constrained by broader economic factors. The demand may not be stimulated to the extent that ‘High’ scenario incorporates government stimulus occurred around the GFC. This assumption is which targets social housing, as well as broader incorporated in the figures outlined in Table 3.
18 PowerHousing Australia The ‘High’ scenario also recognises the possibility • Value of foreign investment approvals in that the economy begins to rebound faster than residential real estate increasing from $36.5b in anticipated. By the time it becomes evident as to 2013-14 to $72.4b in 2015-16: whether the Australian economy is performing > the massive spike in new housing starts was better than expected in 2020/21 - but (inevitably) driven to a considerable extent by foreign still not well - the time for housing stimulus will investment. As the foreign investment have come and gone. component of a new development, particularly All the industry forecast figures presented in the in the medium/high density space’ saw Table 3 are bleak, at best, by historical standards. 20-40 per cent of a development presold, In our view, properly targeted assistance to the then the remaining buyer groups from first new home building sector can mitigate the risk home buyers, investors and owner occupiers of Australia confronting the two worst scenarios purchased the rest; outlined above and potentially bolster the final • The sustainment of elevated levels of new home outcomes of the other two scenarios. building in Victoria over an extended period, While the nation’s leading economists were around driven by a very high NOM rate of population 55,000 homes short of the 230,000 new homes growth. commenced at the 2018 peakx (and it is hoped This confluence of factors saw dwelling that forecasters in this case are overestimating the completions in Australia reach a record of 223,701 trough) this does provide a baseline from which to in the year to the March 2017 quarter. Completions consider the future outlook, need and options for remained above the annual level of 215,000 until the recovery. end of 2018/19.
2018-2021 from peak to trough A reasonable starting point for considering Australia’s unprecedented residential building The historic requirement for new housing in boom underlying demand and future demand is Australia has changed markedly in recent years. the September 2013 quarter, when completions This is a result of the unprecedented residential were running at an annual level of 150,488. These building boom which began in 2012/13 and recorded figures start to bring the magnitude of plateaued from June 2016 to September 2018. the latest cycle to prominence, with the level of nearly 150,500 providing some one-third fewer new The boom was driven by a number of factors, which dwellings than the record two year peak plateau. are important to recognise prior to considering projections for underlying housing demand and Dwelling completions averaged 197,516 per annum new residential construction activity from 2019/20 over the period from the September 2013 quarter to onwards. the December 2019 quarter. This level is 25 per cent higher than the average of 147,399 for the period Key factors include: over 1984/85 -2012/13. Dwelling completions in • Historically (very) low borrowing costs; the December 2019 quarter were still running at an • Historically high levels of Net Overseas Migration annual level exceeding 200,000. (NOM), the majority of which was for temporary While the actual data will not be released until visa holders, but that also included high levels of ABS numbers arrive in mid October 2020, housing permanent (skilled) migration; completions will be shown to remain bouyant at • The strong recovery in new home building in 180,000 for the twelve months ending 30 June New South Wales, which followed a decade of 2020. These actual elevated numbers when recessionary levels of activity for the state; presented will be out of step with forecast demand.
Australian Affordable Housing Report F2021 19 Graph 9: National Building Activity Forecast to June 30,2020 (ABS 8752.0)
250,000
200,000
150,000
100,000 Completions Average completions 50,000
0 Jun 1994 Jun 1995 Jun 1996 Jun 1997 Jun 1998 Jun 1999 Jun 2000 Jun 2001 Jun 2002 Jun 2004 Jun 2005 Jun 2006 Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Jun 2012 Jun 2013 Jun 2014 Jun 2015 Jun 2016 Jun 2017 Jun 2018 Jun 2019 Jun 2020 Dec 1994 Dec 1995 Dec 1996 Dec 1997 Dec 1998 Dec 1999 Dec 2000 Dec 2001 Dec 2002 Dec 2003 Dec 2004 Dec 2005 Dec 2006 Dec 2007 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018 Dec 2019 Jun 12003
Source: ABS 8752.0, Property and Industry Analytics Australia
While this peak was a response to decades of international border restrictions begin to be relaxed, undersupply, the huge tail of activity is still washing which it is too early to tell in mid-2020. though the market in a time now where buyer In a related manner, outcomes will also depend capacity to purchase is forecast to fall dramatically. on the timing and duration of a recovery in labour market conditions. We know from history that Where to now for overall underlying when unemployment rises, NOM falls. Once housing demand and activity? the unemployment rate rises significantly it is (historically) very difficult to bring it back down. In such fluid times it is difficult for any organisation to look beyond 2019/20 with any reasonable degree Prior to the COVID-19 crisis, respected economic of clarity. forecaster BIS Oxford projected an outlook where underlying demand (UD) averages 195,800 over Two factors that are readily apparent are: net the period 2019-2023. That is a level that is 3,426 immigration has impacts on both the demand for dwellings fewer per annum than applied to the 2018 and supply of housing; the demand for housing -2019 period.xi historically reacts faster to crises than supply and large declines in net immigration will have a very big For residential housing, any weakness in migration downward effect on the demand for housing. It is is a significant headwind. UBS estimates there will clear from early temporary visa data for the March be a fall in underlying annual housing demand from 2020 quarter that levels of NOM are already in steep around 200,000 to only around 130,000 in the near decline. term – before recovering towards 190,000 by the end of 2022.xii It may turn out that the relative success of Australia (and New Zealand) in combatting COVID-19 According to the ABS, Australia’s population grew mitigates the substantial downward projection by 239,600 from NOM in 2018-19. for NOM in 2020/21. That will depend on when
20 PowerHousing Australia Australia’s overseas migration intake is projected and to just 0.7 per cent in 2020/21. Australia’s to shrink by more than 85 per cent on 2018-19 population growth was previously forecast to have levels next financial year, due to widespread been 1.42 per cent at the end of 2019. A growth travel bans brought on by the coronavirus.xiii rate of 0.7 per cent would be the lowest on official The government estimates long-term migration records in forty years.1 arrivals could fall by around 280,000 over the Treasury’s forecasts assume a largely steady next 18 months, with a drop of 72,000 in the first rate of natural population growth. The rate of half of this calendar year and another 204,000 in natural population growth feeds into estimates of the 2020/21 financial year. This is a worst case underlying housing demand through the outlook scenario, but highly possible. for household formation rates. Given Australia’s The Commonwealth Treasury expects Australia’s ageing population and historical evidence of a NOM to fall substantially over 2019/20 and decline in fertility rates occurring during periods 2020/21. It projects a decline of 165,000 people in of recession, this assumption appears optimistic. 2019/20 and a further decline of 65,000 people in In turn, that implies downside risk to Treasury’s 2020/21. Under this scenario, population growth forecasts, as previously noted, which in mid-2020 would slow to 1.2 per cent per annum in 2019/20 are the best benchmark available.
Graph 10: Capital City Population Growth
120,000
100,000
80,000
60,000
40,000
20,000
0
-20,000
-40,000 Sydney Melbourne Brisbane Adelaide Perth Hobart Darwin Canberra
n Natural increase n Net internal migration n Net overseas migration — Total change in population Source: ABS, ANZ Research (May 2020)
This is because prior to the devastating economic The impact on the underlying demand for new and social impacts of the COVID-19 Pandemic, housing could see a level as low as 140,000 the trajectory for Australia’s population growth dwellings per annum. That would represent an was already in decline. The rate of population unsustainably low level of new housing provision growth would have declined further, regardless (see table below). Given the aforementioned of contemporary circumstances. It is now the constraints on private demand for new housing, magnitude of the impending decline that counts. the social housing sector can provide vital stimulus which provides both an economic and social benefit.
1 Excluding World War One, it would represent the lowest level in Australian history since 1870.
Australian Affordable Housing Report F2021 21 Table 4: Underlying demand for new housing in Australia – Average annual increase (‘000)
Year ended June Low Medium High Total UD
2017-2018* 199.2 199.2 199.2 199.2
2019-2023 140.0 155.0 168.0 154.3
2024 2028 153.9 159.7 173.4 162.3
2029-2033 158.3 199.7 220.2 192.7
Source: BIS Oxford Economics; HDD Counsulting
Without further housing stimulus and a directed housing will stem from internal sources of ‘market policy towards encouraging net overseas migration, failure’ which already existed, meaning there was when borders eventually open, the Australian a pre-existent lack of supply. Market recovery is economy will fail to recover as strongly and swiftly unlikely to come from overall housing demand which as Australia requires. is primarily driven by the private sector, as is outlined further below. The provision of social housing is a Projections for the Underlying primary example of contemporary demand for new Demand for Social Housing housing which reflects a pre-existing shortage of dwelling stock.2 The need for additional affordable and social Contributing to our social housing waiting lists are housing is real and urgent. This important housing now the thousands of rough sleepers who had cohort will continue to grow, especially given that been placed in accommodation (often hotels) for almost 600,000 people lost their job in April alone, protection during COVID-19 lockdowns. The NSW following the nationwide COVID-19 restrictions government, amongst others, is looking to find a implemented by all levels of government. solution for those in Temporary Accommodation, The overall implication is that the most direct however the difficulty remains: a lack of dwelling approach to addressing the demand for new stock.
Our Social Housing Waiting Lists Number of applicants waiting in each state
Source: Australian Institute of Health and Welfare, 2019 5,212
34,788
14,330
35,257
51,163
2,189 48,280
2 The recent unprecedented boom in new residential construction activity effectively eradicated the excess demand for housing in the private sector, an under supply that had persisted since the 3,496 early-mid 2000’s. Pockets of oversupply did emerge, but have tended to be exaggerated. Through the building boom of the 2010’s, social housing still failed to meet underlying demand.
22 PowerHousing Australia Accessible Properties NZ and PowerHousing, 2019
Rental Stress PowerHousing partner Community Sector Banking’s Rental Affordability Index echoes the same This lack of supply places increased demand on sentiment. Using data which predates COVID-19 the rental market. In Anglicare Australia’s recent by six months, the report illustrated the decreasing Rental Affordability Snapshot (April 2020), almost availability of affordable rentals for vulnerable 70,000 private rental listings were assessed for groups, citing that more than a million households their affordability and suitability for low income need some form of housing assistance.xv Coupled households. Even in the wake of increased with Anglicare’s Snapshot, the future looks bleak. government subsidies due to COVID-19, the ability to find an affordable rental property is dire. With the high rental prices, people on lower incomes are also Fit for Habitation Rentals competing with people on higher incomes who are In New Zealand, the government released Healthy not themselves in homeownership.xiv Homes Standards for rental properties which The Snapshot reported the following: became law on 1 July 2019. New Zealand CHP and PowerHousing Associate Accessible Properties • Only 1.5% of rentals are affordable for a person is implementing the measures across two and on the new increased Jobseeker payment; a half thousand properties which has been best • Without the increase, not a single rental would practice for our Australian Members. Like the be affordable for jobseekers in the major cities of NSW legislation, it aims to improve the quality of Sydney, Melbourne, Adelaide, Darwin, or Canberra; rental homes, leading to improved health of the residents, thus lowering medical costs and levels • 1% of rentals are affordable for a person on the of hospitalisation. It is also anticipated that warmer Age Pension; and drier homes means that landlords are less • 0.5% of rentals are affordable for a person on the likely to have issues with mould or mildew damage, Disability Support Pension; and therefore protecting their investment. • 2.4% of rentals are affordable to a single person The standard of rental properties is varied, not working full-time on the minimum wage. only in the private rental market. Ageing rentals maintenance have been forced over COVID-19
Australian Affordable Housing Report F2021 23 to be placed on hold as issues (both scheduled 5. Have adequate plumbing and drainage and non-scheduled) have been backlogged as 6. Be connected to a water supply service or have a result of COVID-19 lockdowns. Even before infrastructure that’s able to supply hot and cold the pandemic, the standard of rental was under water for drinking, washing and cleaning review and the NSW government introduced its Fit for Habitation requirements through its revised 7. Contain bathroom facilities that allow for Residential Tenancies Act in March 2020 (enforced privacy, including toilet and washing facilities. xvi has been relaxed over COVID). Both Queensland Whilst these criteria seem fair and logical, it is the and Victoria are looking to follow suit, to ensure case that there are still rentals (both private and minimum living standards are reached in rental government) that exist with substandard living properties. The NSW legislation stipulates that all conditions in which our most vulnerable groups rental properties must: continue to reside. 1. Be structurally sound (a reasonable state of The Fit for Habitation requirements are expected repair, no significant dampness, no water to soon be enforced as COVID-19 restrictions penetration, and structural elements not be ease. Andrew Cox of Property Safe, which has liable to collapse because of rot or defects) over 50,000 tradies registered and maintenance 2. Have adequate lighting, either natural or artificial contracts across Australia, has seen these trades (except in storage rooms or garages) pick their tools back up as backlog maintenance and proactive work is now underway in anticipation 3. Have adequate ventilation of the requirements being enforced in October. 4. Be supplied with electricity or gas with an These tradies have been seriously grateful to be adequate number of outlets for lighting and back out on site and this maintenance work will heating generate thousands of jobs in the coming months.
Case Study – Aaron now enjoying being at home
Newly housed Foundation Housing tenant priority status on the joint housing waitlist Aaron says being offered a one-bedroom unit enabled him to be offered a tenancy when in a complex in East Perth during COVID-19 the unit became available. Friends have restrictions has been life changing. helped him to furnish it and the former baker is now looking forward to hosting a mini Aaron, who is in his late 40s, moved in a week housewarming to watch the footy over burgers and half ago and says it’s wonderful to have (with homemade buns of course!) now that a ‘forever home’ he can make his own. Prior restrictions in WA are largely lifted. to becoming a tenant, Aaron was staying at a Men’s Shelter operated by the Salvation Army While Foundation Housing moved rapidly to minimise all non-essential contact when and said he wasn’t expecting his situation to COVID-19 restrictions came into place in change during COVID-19 as restrictions had March, they have continued to allocate homes put a ‘stop on everything’. in their mainstream portfolio to new tenants While initially hoping to secure a room in in order to house as many people as possible a lodging house, he was delighted that his during this difficult time.
24 PowerHousing Australia A3. WILL THE MARKET KICKSTART ITSELF?
The challenge will be that the housing market may not To put the rescue package into perspective, the 3.3 be capable of being able to kickstart itself, a challenge million Australians and their employers supported by that may last for many years, due to a combination of JobKeeper today costing around $10 billion a month. factors. If these people were unemployed the unemployment rate would be above 30 per cent. Since 22 March 2020, Australia saw the progressive introduction of social distancing and business-related Clearly, the ongoing health and economic impacts operating restrictions to minimise the spread of of COVID-19 are prompting governments, business, COVID-19. In addition, a range of government support NFPs and the wider community to rethink how society measures were announced, including changes to the should, and could operate. Employment and housing JobSeeker program (announced on 24 March), the are two themes in particular that have dominated temporary suspension of the requirement for people discussion over recent months. to actively look for work, and the introduction of a JobKeeper wage subsidy (announced on 30 March).
Graph 11: Employed People (Total)
13,100
12,900
12,700
12,500
12,300
12,100
11,900
11,700
11,500
11,300
Apr 2015 Aug 2015 Dec 2015 Apr 2016 Aug 2016 Dec 2016 Apr 2017 Aug 2017 Dec 2017 Apr 2018 Aug 2018 Dec 2018 Apr 2019 Aug 2019 Dec 2019 Apr 2020
Source: ABS 6202.0 Table 1 (Seasonally Adjusted)
Australian Affordable Housing Report F2021 25 Adding to this issue is the growth in the number shape the recovery. It is difficult to be precise about of underutilised (a combination of unemployed the magnitude and timing of these effects. and underemployed) workers - rising 6 per cent The Australian Banking Association recently to 20 per cent in April alone. A reduction in work released new figures which showed 429,000 hours and wages will place further pressure on the mortgages had been deferred totalling $153.5 affordable housing market, given that for many, the billion.xxii The figures take the total number of loans proportion of household income spent on housing deferred to 703,000, worth a value of $211 billion. will rise past 30 per cent - a common indicator of As we reach October, with a higher unemployment housing stress. rate, the question will be how many of these loans The ABS wage price index saw wages rise will need to be deferred for a longer period of time. nationally at just 2.1 per cent for the year ending March 31 2020.xvii House prices are forecast to drop Flatlining wages growth, decades of massive price UBS expects house prices to decline at least 10 increases for residential property and the looming per cent in the coming year, in line with our ‘full largest decline ever in housing commencements pandemic scenario’. Indeed, without an easing set to emerge in the next calendar year, threatens of mobility restrictions, and/or more direct policy to collectively have a very negative impact on the support, the price falls will likely be larger.xxiii economy. That was always going to be a challenge in 2020, even prior to COVID-19.xviii Morgan Stanley’s Australian equity strategists said this would flow through to house prices and they • The RBA expects that total hours worked expected a decline comparable to the previous will decline by around 20 per cent and the downturn of 10-15 per cent.xxiv unemployment rate is forecast to rise to around 10 per cent in the June quarter.xix SQM predicted falls of up to 30 per cent in house pricing.xxv Looking at the cumulative change between March and May, had the increase in the number of people Morgan Stanley joins major bank economists and who were not in the labour force (623,600) been a investment house AMP Capital in taking a cautious further increase in unemployment, then the number approach to housing, with researcher SQM also of unemployed people would have increased to predicting falls of up to 30 per cent. around 1.55 million people (and an unemployment “We expect a broad housing downturn, with the xx rate of around 11.3 per cent). rental market in particular likely to weaken, as In terms of our economy the RBA estimates:xxi higher unemployment and a reduction in net migration both work to reduce housing demand, • The Australian economy is expected to record pushing vacancy rates higher and rental prices a contraction in GDP of around 10 per cent over lower”, Morgan Stanley, May 2020.xxvi the first half of 2020; “The deterioration in established housing market • Headline CPI is expected to fall by around 2¼ per conditions is expected to prolong the decline cent in the June quarter and headline inflation is in dwelling investment. Dwelling investment is expected to be negative in year-ended terms for expected to be significantly lower over most of the first time since the early 1960s. the forecast period than forecast in the previous The initial phase of the recovery is likely to be primarily Statement. The trough in construction activity is driven by the easing in restrictions, which will lead now projected to occur in early 2021, half a year to an improvement in employment outcomes as later than previously expected. The near-term businesses re-open, as well as a pick-up in household downgrade to activity incorporates information from spending. In the latter part of the forecast period, liaison citing significantly weaker demand for new business investment decisions will more strongly dwellings”, Reserve Bank of Australia, May 2020.
26 PowerHousing Australia The analysis points to the devastating impact that Building Approvals and ABS Housing Finance. Both restrictions on mobility will play in the housing indicators declined significantly from late 2017. market, hampering not just resident Australians, but Building approvals peaked at a record annual level staunching the inward flow of migration, a key driver of nearly 226,000 in November 2016. Since that for the property market. time approvals have fallen by 44 per cent, prior to The market’s expectation is that it will recover. But mounting a very modest recovery over the nine the depth and duration of the downturn and the flow months to March 2020. on impact to employment in trades and subtrades is ABS Building Approvals to the end of April equated to of deep concern. 173,802 dwellings approved for the past 12 months. The three months through Feb-Apr 2020 saw 46,000 Future Pipeline dwellings approved alone which, would annualise to around 186,000 dwellings approved if carried Two prominent leading indicators of new housing forward.xxvii This shows a large potential pipeline that activity and intend to build new homes are ABS can still come through.
Graph 12: Monthly building approvals for Australia
26,000
24,000
22,000
20,000
18,000
16,000
14,000
12,000
10,000
8,000 Mar 99 Mar 00 Mar 01 Mar 02 Mar 03 Mar 04 Mar 05 Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 Mar 17 Mar 18 Mar 19 Mar 20 Mar
Source: ABS 8731 Seasonally adjusted Trend
This latest recovery is arguably unsustainable given It is premature to consider the probability of a the detrimental economic effects of COVID-19. recovery in new home lending figures in 2020/21 or even 2021/22. The Building Approvals measure Building approvals are projected to display a outlined above will be critical to observe whether substantial further step down. One possible scenario there is a surplus of supply to demand. It will also is that approvals fall to levels equivalent to those be critical to watch for a bounce back in activity as evident for the early months of 2012. That would monthly updates unfold. mark a further decline of 30 per cent.
Australian Affordable Housing Report F2021 27 Are people borrowing to build?
Westside Housing Company (SA)
Two components to ABS measures of housing fell substantially from the beginning of 2017. The finance are lending for the construction of a decline continued into 2020. Between September dwelling and lending for the purchase of a new 2019 and March 2020 the value of lending declined dwelling. The latter measure captures the financing by a further 21 per cent.3 of: off-the-plan purchases of (primarily) medium/ Lending for the purchase of existing rental high density dwellings; and purchases of newly built properties fell to a considerably smaller extent over dwellings not previously occupied. the 2017-2019 period. The latest profile shows Lending for construction has been in sharp overall lending falling by 15 per cent between September decline since mid-2018. Lending for the purchase 2019 and March 2020. of a new dwelling mounted a strong recovery over Australia’s residential rental markets are highly 2019, but subsequently fell by 14 per cent over vulnerable to the negative economic impacts that February and March 2020. will stem from COVID-19. This decline in lending for a new dwelling reflects The outlook for rental property demand was the early adverse effects of COVID-19. This type of already concerning in 2019. Rental yields were financing is expected to drop further in the June low in an environment where many markets were quarter. Signs of any pick-up in lending volumes not experiencing growth in residential property from mid-2020 would provide an early signal of a prices. The risk for 2020 and 2021 is that even recovery in the demand for medium/high density lower rental yields, falling rents (which is already dwellings, in particular. happening), and a negative outlook for residential As of March 2020, the number of loans for property prices will generate considerable fractures construction fell by around 20 per cent from their in rental markets. There will also naturally be (July 2017) peak. A significant deterioration in broader economic constraints at play, largely but the number of these loans may become evident not solely relating to higher unemployment rates over the June 2020 quarter or until HomeBuilder and slow employment growth. The supply of new starts to have an impact. Any signs of stabilisation private rental dwellings could fall markedly. Many and recovery as Australia moves through the landlords will face substantial financial pressure, middle part of the year will signal the prospect of as is already emerging. a turnaround in new home building activity as the With 429,000 home loans deferred, there are also nation enters 2021. question marks about the ability of banks to lend A third measure of new home lending is the into any residential or stimulus efforts in the next financing of dwellings for rent. Lending for the two years. construction or purchase of new rental dwellings
3 The ABS changed the methodology used to measure residential lending in 2019. Consequently there is a break in the data series.
28 PowerHousing Australia Byfield, Standard House Design - Simonds Homes
Section B – 04 Standard House and its Impacts When we consider housing purely in terms of NHFIC’s Building Jobs Report found that $1 million numbers it is quite difficult to draw a connection of output in residential construction supports a between its impact on the economy, its role in multiplier of 2.9 which is around $2.9 million of creating jobs and what it provides to families. industry output and consumption across the broader economy.xxviii Construction is a powerful enabler of Housing activity will be reconsidered in this next the economy. section, to draw a link between the drop from 230,000 home starts in 2018 that are forecasted And here is a comment on housing: “The housing to drop by 100-120,000 homes in the next year and sector has a pervasive impact on the Australian its implications for real peoples’ jobs. Focusing on economy. It accounts for the bulk of household jobs in construction, manufacturing and retail in wealth, and around 6% of employment is related to particular, we can see the importance of flattening the residential construction sector. The linkages to the housing trough to ensure that we land closer to the rest of the economy through consumer spending, longer term averages of completing 160-165,000 manufacturing, and the business service sector homes per year. ensure that housing cycles are very closely related to the broader economic cycle in Australia.”
Australian Affordable Housing Report F2021 29 Not only do construction, manufacturing and retail What COVID-19 has shown as much as anything jobs pick up and economic strength return with every is that just having a job creates wellbeing beyond home built, we see homes created where families financial, it creates purpose. Anecdotally, stopping on live. We examine this latter point in greater detail to the way home on a Friday afternoon to pick up the illustrate the benefits which go beyond the economic pizza after a solid week’s work on site, in the plant or to the social. Behind the measures of jobs and case facing the public in the hardware supplies shop is all studies below there is a story of wellbeing that goes the more sweeter. beyond personal financial comfort.
B1. Construction
To illustrate the benefits, both social and economic, Barton designs are three-bedroom houses that both that new housing supply delivers to Australians, provide a well laid out home, well suited to meet the we’ve analysed ‘standard home’ designs from three needs of Australian families. of Australia’s biggest and most well-known volume At 179.67m2 it packs a lot of features within this builders. compact design that could suit many Australian For the purpose of evaluating the materials and the families and a similar style can be found across Standard House we have considered the Byfield Australia and is the place where family memories design built by scale national builder Simonds are made. Homes. We have also considered a high volume But looking more closely, it is clear that the labour, Barton design ‘standard house’ by the nation’s manufacturing, production and supply of the largest builder Metricon, and the equivalent design materials that make up these homes provide value to of Australian household brand AVJennings. the social and economic fabric of our communities As displayed in the appendices, the Byfield and that is truly remarkable.
“Before a shovel hits the ground to construct a standard dwelling, there are many different professional services that see the phone ring and emails exchanged. The “front end” of the construction process covers planning and design of not only the dwelling, but also the infrastructure, place-making, urban design, landscape and services. These processes generally take longer than the construction period and employ many companies such as town planners, urban designers, surveyors, civil engineers, engineers, energy consultants, architects, interior designers and landscape architects. If that house doesn’t get built these tasks, jobs and activity also drops off for a lot of people.” Junction Australia (SA) Matt Drysdale of the Office for Collective Design
30 PowerHousing Australia A house such as the Byfield or Barton, provides “I am encouraged to see a report that construction jobs that are activated every time a new documents the very tangible impact the home is built: from the architects to the planners, para- professionals in services, earthworks, construction construction sector has on Australia’s trades through to finishing trades. Further on in the economy. Based on Metricon’s 44 years, I can project timelines landscapers and property services all confidently say that an active construction find work. industry equates to a healthy economy. At A ‘standard house’ design is estimated to provide Metricon, 1,800 employees and up to 10,000 up to 31 trades, subtrades and para professional categories with a period of work from 1 day to 90 Australians work on our build projects on days. As there are multiple people performing a trade any given workday of the year, and 6,000 onsite concurrently, such as a carpenter or painter, the individuals are indirectly employed through number of families with a home construction-related breadwinner is much higher. our supply chains. The livelihood of many If you consider that Australia in the 12 months to Australians depends on the construction September 2018 commenced an extraordinary industry.” 230,792 homes, then using the scale builder estimates, this activity equates to around 6 million Mario Biasin, Chief Executive Officer and work engagements in a year for trades, subtrades and para-professionals. Co-Founder, Metricon Homes
PLANNING TRADES & & DESIGN SUBTRADES
ENGINEER CARPENTER ROOFER BUILDING ESTIMATOR CONCRETER PLASTERER BUILDING SURVEYOR BRICKLAYER RENDERER ARCHITECT JOINER PAINTER BUILDING SUPERVISOR ELECTRICIAN TILER PLUMBING INSPECTOR PLUMBER CARPET LAYER BUILDING CERTIFIER GAS FITTER FENCER KITCHEN DESIGNER CABLER EARTH MOVING BATHROOM DESIGNER LABOURER WASTE REMOVAL GLAZIER ROOF PLUMBER 43 LANDSCAPER AIR CONDITIONER DIRECTLY ENGAGED
Australian Affordable Housing Report F2021 31 With forecast activity at the end of June expected Such a drop (as forecast earlier in this report) will to sit at around 180,000 dwelling completions for have a detrimental impact on housing which could the previous 12 months, and the national residential be counteracted by layers of residential stimulus peaks forecast to drop to only around 115-125,000 policy. commencements for F2021, there are clear buyer In suburban communities, and particularly in demand challenges that will see many new homes smaller regional towns across the country, this completed but few new homes started. home design creates a lot of jobs for families. In In the scenario where Australia’s build rate falls from many cases, smaller builders quite often have a 230,792 homes completed to only 110,000, this in family member (many with small children as work simple terms would see the loss of over 4.75 million from home parents) running the back of house trade type engagements from the shortfall of some for the business. This includes bookkeeping and 110,000 homes not being built. supporting the logistical requirements of keeping the business going. It is fair to say that these business Outside of the tax and stamp duty implications, arrangements mean the number of jobs tied to each there will be a great many people less likely to derive standard house increase substantially. incomes from this work stream for some time, until at least 2025.
The local Builder In the case of smaller regional builders, such as Dale Crawford from Upper Natone, near Burnie in North-West Tasmania, the number of trades on site drops significantly, but the periods of work and multi-trade expertise means that there is a bit more time on site. Dale and his wife Julie have been in the building business as a partnership since 1982. Dale has had over 40 years in the industry and his wife Julie works mainly in office administration. Currently the business undertakes 2-3 new builds and 5 or so renovations per year, which allows them to employ around three carpenters and one apprentice at any given time. The business services areas all along the North West Coast with many subcontractors who support this longstanding business.
“Government stimulus for social housing generates employment and growth. A standard house can require an architectural draftsperson the equivalent of a day or so to amend the design to suit the site and assist planning through to the equivalent of three months full time employment generated for one of our architects for a new Special Disability Accommodation (SDA) home.”
Aaron Stowe of Architecture and Access
32 PowerHousing Australia AV Jennings – The Australian household brand
For many Australians, the images of thousands it provides the occupiers and the flow-on of Australians queuing outside Centrelink benefits to society. Sir Albert Victor Jennings offices illustrated the potential economic believed in this so much he started his own impact of COVID-19. People of all ages, some property development business in the depths with young families, feared they would not of The Great Depression in 1932. He wanted have a roof over their heads within a matter as many people as possible to be able to have of weeks without support from the federal a house of their own and, almost 90 years and government. It reinforced how vital housing thousands of homes later, that remains the is. Not just as a fundamental need for shelter AVJennings company purpose today. but because of the security and happiness
B2. Manufacturing Jobs and Housing Innovations
The Standard House, which is made up of many CSR’s PGH Bricks manufacture around 350,000,000 materials that are commonly found in this type of bricks for roughly 48,000 homes a year and has 10 dwelling and its value to the social and economic brick manufacturing plants located in Victoria, New fabric of our communities is not to be understated. South Wales, Queensland and South Australia. The economic activity generated from new home The PGH Bricks plant as featured provides 47 building doesn’t end with the trade and subtrade workers with a job in Albury. This plant which employment opportunities but extends right down the has been employing Australians for 40 years and supply chain. many others like this plant see opportunities for employment when Australia builds 230,000 homes in a calendar year. As a further flow on, the plant Bricks CSR PGH Bricks almost exclusively employs local labour and sub- contractors for any maintenance and also tries to purchase all local products to fulfill needs.
Painting Investment by the Australian Government directly relating to the stimulus of new housing stock would provide a tangible support for DuluxGroup’s new housing related business segments, as well as many PGH Bricks - Albury Plant (NSW) other Australian building product manufacturers. The commencement of a tranche of say 10,000 units Construction of a home of the size of the Byfield or of housing stock in the Australian market would Barton requires around 5,000 bricks to complete the be seen as a significant step with broader positive dwelling. In addition to the brickie who earns $1.50 for impacts across the industry. Specifically, this equates every brick laid, there is an Australian manufacturing to adding approximately 2,000,000 litres of decorative plant providing employment for a significant number paint demand into the pipeline. This activity would of Australians in regional towns to supply the bricks support local manufacturing jobs within Victoria and for new home construction. Queensland along with broader distribution, retail
Australian Affordable Housing Report F2021 33 and trade jobs nationally through the supply chain. result of COVID-19…efforts to keep the construction As indicated by the Australian Paint Manufacturers industry working will be crucial for the economy, as Federation, the great thing here is that around 90 per any downturn in construction activity will impact jobs cent of paint used in Australia is manufactured locally. in many other sectors that support building activity in Australia (Pat Jones, Chairman Australian Paint “A lot of trade painters who are often sole traders Manufacturers Federation)”.xxix have already lost work or had jobs cancelled as a
Framing/Truss systems
Timbertruss Victoria
The Standard House dwelling includes truss, and additional savings are available through repeat wallframes and fully clad wall systems that are manufacture of exactly the same and multiple house manufactured in Australia, by Timbertruss which has types. been in operation since 1989. When Penny O’Leary The immediate benefit to the Timbertruss workforce (General Manager) and Steve Collier (Business of increased production through affordable housing Manager) started in the business they had a staff of would give greater job security and certainty to a 19 and now have a total staff number of over 600 workforce who remain concerned as to the future. becoming one of the largest manufacturers of these This directly means additional jobs in regional towns building products. They operate out of Queensland and major centres where they have manufacturing as and Victoria, and currently manage the largest and well as their plant in Geelong (pictured) in Victoria. most automated house prefabrication facility in the world. What does it mean when the housing market drops Innovative manufacturing by 50 per cent over two years, naturally it means less Fibre cement James Hardie truss systems and timber from plantations. What does it mean if large numbers of new homes are Firstly, on the standard house plans, building a home brought on line, in short, it’s huge. With scale numbers in light weight James Hardie Fibre Cement, which is of new homes coming through a stimulus program manufactured in Australia and has locally sourced it means that economies of scale come into play raw materials, has many advantages as there is a sense in being able to support a differentiated
34 PowerHousing Australia Southern Cross Housing – construction providing job opportunities in Nowra product that can be built quicker, more economically apartment buildings in Victoria, New South Wales and and have great street appeal. Queensland with impressive results. Faster build time: Building a home in fibre cement, In one example, Allume was contracted by Housing the carpenter installs this cladding. This can alternate Choices Australia to install a 66-kilowatt solar system some or all of the need for a ‘wet trade’ such as the on a 44-unit community housing building. The system brick layer. With a diminishing number of brick layers was switched on in November and the residents this innovative product is not only installed faster per have seen their electricity bills reduce by over 40 per square meter, but also reduces the amount of waste. cent. That’s an average saving of $35 per resident per month: a significant amount of money especially for Waste management: Our insights tell us that the someone on JobKeeper or the minimum wage. dumping costs on each job are between $2,000 - $3,000 minimum. Really this figure is much higher A housing stimulus constructing 10,000 dwellings due to inefficient design. By utilising a James Hardie with rooftop solar would see an increase in the solution in scale delivery of new homes can reduce production of the Australian-made SolShare, leading waste, handling costs and deliveries to site due to the to over 50 new jobs in manufacturing and engineering nature of estimating correctly, perfectly manufactured in Victoria and 550 new jobs in electrical trades products and usage of offcuts. across the country. Just these two points alone enable homes to be built faster and with less waste, reducing costs and time to Guttering completion which will ultimately contribute to greater Eaves Water System Australia P/L is 100 per cent manufacturing jobs and efficiencies in delivering owned, operated and manufactured in Australia with homes at lower cost. 100 per cent recycled content made of Colorbond Steel and ASA Plastic Components. What is brilliant Solar energy about this closed top guttering manufacturing innovation is that the guttering has reduced fire risk, less stormwater maintenance, greater rainwater harvesting, minimal property maintenance, and it is Australian made. In 2016 Eaves Water System Australia was the recipient of a six figure Federal Government Commercialisation Grant, and the following year was issued with a “Deemed To Comply” confirmation from Land and Housing Corporation NSW. Since this time Eaves Water System, has been Allume Energy extensively used on multiple sites by Community Housing Providers on both New Builds and Managed Allume Energy is an Australian start-up that has Properties, and would be taken up in greater volumes invented and patented the SolShare, the world’s if there is a new build or maintenance program to first technology for sharing rooftop solar in multi- stimulate the economy. unit buildings. The SolShare unlocks the benefits of rooftop solar – lower electricity bills and bill shock On the above basis an unmaintained Open Top Gutter and a reduced carbon footprint – to people that have with Mesh would last 15 years versus 40 years for Eaves previously been unable to access it because they live Water System. Therefore at a cost of $5,807 (GST inc) in an apartment building. per dwelling, 15 years for traditional gutter, or $2,173 for Eaves Water System when amortised over a 40 year Over the past year, Allume has demonstrated the lifespan. (Analysis/Data provided by SPM Assets). technology on private and community housing-owned
Australian Affordable Housing Report F2021 35 In summary, for every dollar spent on Eaves Water using road transport creating more opportunities for system in lieu of traditional guttering methods the employment. return on investment (ROI) to the Community Housing The build process is directly supported by tens Provider (CHP) is $1.57 (157 per cent). of thousands of people across Australia, not to Eaves Water System notes that the above ROI mention the thousands more in place to support the analysis does not include other benefits and potential infrastructure and logistics required to keep all of cost savings listed above. this moving; transport mechanics, mobile plant sales and maintenance, cleaners, racking and store fixture manufacturers, facilities maintenance businesses, B3. Retail Impacts shopfitters, signage printers, IT companies, commercial builders, landscapers, line marking contractors and the list goes on. Hardware and Nursery Retail Housing activity supports jobs throughout the build Harvey Norman Commercial Victoria process for multiple local businesses such as local The standard home project for PowerHousing hardware outlets, with hundreds of thousands of Australia provides Harvey Norman Commercial people working in Hardware Retail situated in towns Victoria with the opportunity to highlight the and cities right across the country. The people importance of the Community Housing & Social working in these stores have the opportunity to Housing Sector and the role of their business at this support and engage with tradespeople as they come time to assist in supporting the wider economy. in to research, learn about new products and shop for materials and consumables. But this is only a small As a trusted brand house and industry leader, Harvey part of the wider support network in place across the Norman Commercial is an ASX Top 100 Company supply chain. Worth $5Bil+ (HN Group sales) whose support behind a COVID-19 rebuild will support those construction It often starts with Account Managers from the sales jobs, but also drive the many thousands of retail jobs team working closely with builders on their projects that delivering scale social and affordable housing to find out what they need, how they can best help can provide. Across the country, Harvey Norman with project planning and assisting with the design Commercial Divisions directly employ over 1500 team and specification of each build. This brings into play members, and the Harvey Norman Group employs suppliers to the industry who have their own reps on over 10,000 staff nationally. Their commercial the road to educate the market on their products, as business runs in strong correlation to new home well as support flow of stock through retail outlets. creation and investment. There are also reps visiting stores to manage stock orders and support the retailers and builders with any Each new social housing dwelling represents issues or challenges they might encounter. approximately $12,000 in direct and indirect procurement spend to Harvey Norman Commercial, Manufacturers and wholesalers receive orders of which they estimate 40 per cent of the value rests which are fulfilled by warehouse management in our local supply chain, creating & maintaining jobs teams including forklift operators, warehouse and for Australians. administration staff. The transport industry then gets involved through road and often rail transport to move As we start to work our way throughCOVID-19, goods around the country, delivering either to the Harvey Norman Commercial the Victorian division retailer or direct to site. of Harvey Norman Commercial, Australia’s largest commercial sales provider of appliances, sanitary From there receiving teams and replenishment teams ware, audio visual and professional products looks move the stock through the stores making it available to work with the Sector and Australian Governments for customers to collect. In addition, teams of stock where possible to support the construction activity pickers collate orders for pickup or delivery to site that will be needed. on behalf of the builder, which are then delivered
36 PowerHousing Australia Flooring retail and this supports thousands of retail jobs across the country. The Standard House project will no doubt deliver on the short fall of expected new builds but will also deliver the added benefit of employment within local and regional towns which Karndean have supplied and supported over the past 40 years. Karndean’s Australian customer base of over 800 flooring retailer outlets conservatively employ well over 5,800 employees who are generally made up of local families working to build regional towns into thriving communities. Karndean is a proud family owned Karndean Design Flooring and SGCH business who offer up expert advice and real flooring Karndean is one of the nation’s largest suppliers with solutions that save on operating and replacement their flooring found in Australian homes, new specialist costs that can be an unforeseen financial burden, if disability accommodation dwellings, and retail stores the product is not chosen carefully. Karndean offers such as Coles - Aldi and Subway. Karndean itself the only Lifetime Residential warranty, which equates is an Australian run sales, supply and distribution to 35 years in the family home that can be fully business that has National reach and exposure, hiring transferable to the next owner. staff all over Australia with a huge retail presence. In addition, there are thousands of vinyl installers Karndean are major suppliers to the largest flooring who are fully qualified flooring installers that gain retail chains, independents and flooring installers employment over the renovation/build process. across Australia, which supports thousands of city and Majority of flooring businesses and flooring installers regional businesses varying in revenue and staff size. are owned and operated by families who employ local Where a new home is built or renovated there is a retail sales staff and installer trades, which in turn re-invest transaction of approximately 146sqm of Karndean tile/ profits back into the community. plank required to be laid over the available floor space
Hume Community Housing (NSW)
Australian Affordable Housing Report F2021 37 Secondary impacts
The value of the trade worker stopping for a pie at lunch or a pizza at the end of the week keeps secondary retail going every day. As indicated by the ABS Labour Force statistics for May, jobs losses are still rising. The retail and hospitality sectors are getting hit hard by the COVID-19 recession with 44 per cent of job losses hitting Australians aged under 25. Teenagers and young workers lost a stunning 100,000 jobs in the coffee or dropping in for a pie and a drink during month of May alone – nearly half of all job losses. lunch at the local bakery. This was the experience Over the first quarter of COVID-19 from March to for J&R Bakery during recent building works in the May, over 824,000 jobs have been lost with the local neighbourhood. Restaurants and retail get a under 25s bearing the brunt and losing 329,000 jobs. boost as the tradie heads home at the end of the Small corner stores receive a boost from the week and of course there is a multiplier to this that Standard House or a new development getting continues to help the economy. underway with tradies coming in for a morning
J&R Bakery, Rivett (ACT)
38 PowerHousing Australia Unison (Vic)
Section C – Housing’s renewed role in building 05 resilient Australian Communities
There is a role social housing can play in mitigating In the last major economic downturn, social housing the inevitable sharp decline in new home building and affordable stimulus took up a lot of the slack activity, while supporting both housing and labour when the market was unable to respond. It was quick demand. to reactivate the residential activity when new home buyers just weren’t there. The current scenario for the immediate future is a further decline in the market, which ultimately Any stimulus in the residential sector through the means less construction activity, resulting in less vehicle of social and affordable housing can only expenditure in supply and labour chains and fewer provide the proposed immediate impact on activity jobs. (12-24 months) if it is not encumbered by any transactions reliant on private market sales.
Australian Affordable Housing Report F2021 39 Housing Plus (Regional NSW)
The need for additional affordable and social housing resilience and capacity in our unique and vital roles in is real and urgent with significant waiting lists for the community. public housing. This cohort will continue to grow, One thing that makes PowerHousing member CHPs especially given that almost 600,000 people lost critical to the housing sector and sets them apart their job in April alone, following the nationwide from other housing providers is that they are scale restrictions implemented and supported by all levels not-for-profits, focused on providing social and of government following medical advice.xxx affordable housing for large numbers of moderate- The most recent AIHW National Social Housing to very low-income earners, and complement Survey reports that at 80 per cent satisfaction government policies to increase homeownership and levels, community housing tenants have higher reduce rental stress for all Australians. Affordable levels of satisfaction, are more satisfied overall than housing is an emerging international asset class for those living in other forms of social housing, have investment which has demonstrable characteristics better employment and educational outcomes and and long-term investment for the communities and live in structurally better dwellings. The ability of cities in which they operate. Community Housing Providers (CHPs) to deliver Our CHPs are mostly located in or near the best practice outcomes for tenants, and provide communities where they manage or hold affordable affordable housing services through a sustainable housing dwellings. This enables them to use a business model of reinvestment for social purpose, personalised approach to understand the needs of has helped the community housing sector to grow the community and assist individuals and families rapidly over the last decade. in accessing a wide range of services and facilities other than housing. CHPs also contribute to creating PowerHousing Member Capacity employment opportunities in the community, as workers and contractors for the management and What is certain is that our member organisations maintenance of dwellings are usually sourced locally. are well positioned to play a key role for both current Our CHPs are both financially literate and responsible tenants and a significant number of new Australians and this is evident by the expertise and career stories that will not have job certainty in late 2020 as the of the CEOs, CFOs, COOs, and development/ asset temporary JobKeeper support winds down. executives. They are capable of executing plans to From member reports, staff are stepping up, our achieve financial outcomes while at the same time tenants are doing well and we are seeing stability adapting to and working with a rapidly changing in payments across the weekly statistics sent in political and economic environment. by Members. This sends a strong message of our
40 PowerHousing Australia Case Study – Haven: Home, Safe
Regional Victoria
• Lobb Street North Bendigo • New Construction, North Bendigo, 8 x 2 bedroom dwellings, • Local Contractor PCP Construction • Due for completion August 2020 Representative of a typical infill site, with a small aggregation of units or townhouses, that can meet criteria around 100 per cent social occupation with due regard to density within the context of both operational site management by a CHP, and within a neighbourhood. There would be many opportunities to identify and secure many such sites in both regional and metropolitan locations, with or without planning. Enhanced planning mechanisms (such as those enacted during nation building) would be advantageous.
While providing a range of affordable housing provision of secure and affordable homes as well as options to vulnerable individuals and families helping tenants achieve socio-economic outcomes. at below market rate rents, CHPs continue to As noted in the 2019 Report on Government strengthen and expand on a housing delivery Services, throughout 2017-18, 81.8 per cent of business model of sustainable and structurally new community housing allocations were to those efficient principles to increase investment. This households in greatest need. demonstrates CHPs’ commitment to increasing the
Australian Affordable Housing Report F2021 41 Report: Technology enabled targeted response
JLL undertook comprehensive demographic The report reviewed the regional women’s and socioeconomic research to support the needs and challenges across the following development of YWCA Housing’s National themes: Housing Strategy. This included the collection • Housing challenges: 1 in 3 women in and analysis of data on: unsuitable housing feel unsafe • Demographics: including population, • Managing finances: 87 per cent of women dwellings, tenure, age, education face financial stress, with 39 per cent attainment, employment and income unable to pay utility bills on time • Measures of socio-economic disadvantage • Experiences of homelessness: 1 in 8 • Homelessness women had been homeless in the last five years and a quarter of those women had • Gender pay gap hid their homelessness from others • Family, domestic, and sexual violence • Support and assistance: 1 in 3 women said • Housing market trends in specific locations that access to more affordable housing JLL also provided property-related advisory would help them the most, and half of services, aligning the demographic insights women saying a reduction, or subsidy on with YWCA’s strategic and operational current housing costs would assist also priorities and broader property portfolio. JLL • Housing priorities: the key priorities identified disadvantaged LGAs where YWCA identified in the report from regional women has landholdings and overlayed demographic were: safety, independence & autonomy, measures such as women’s personal security of tenure, access to facilities and incomes, educational attainment, workforce reduced costs/financial pressures participation, and household type to better understand each geographic location.
The number of community housing dwellings has Community Services transferring the tenancy more than doubled between 2008-09 and 2017- management of around 14,000 social housing 18 from 39,800 to 87,800 dwellings, while public tenancies to CHPs, of which around 11,000 are housing has decreased by 20,000 in the same to be managed by PowerHousing Members. As period. i While CHP properties are increasing, CHPs continue to work in partnership with different overall, social housing stock has not kept pace with levels of government and the wider private sector, household growth, at 4.6 per cent of households in the community housing sector is destined to see 2017- 18, down from 5.1 per cent in 2007-08. greater growth and the appropriate housing of more Australians. This pace of growth has increased in 2019 with property transfer programs such as Family and
42 PowerHousing Australia SHARP COVID Stimulus Policy 7. Complement, rather than replace, existing initiatives and assist in the achievement of a Along with other national leaders, PowerHousing viable and interconnected housing system. Australia has backed the call for an immediate 8. Build capacity in not-for-profit CHPs and employment-boosting investment in the CHIA SHARP encourage innovation in construction quality proposal to expand Australia’s social housing by and design 30,000 homes as the country experiences a wave of job losses due to COVID-19. While the market 9. Maximise public value through CHPs for housing is going through an uncertain period, combining their rental income with other consideration of the options such as this proposal government subsidies, tax benefits, partnership would help ensure a smooth pipeline of new dwellings arrangements and private finance to provide and jobs activity estimated by SGS Economics. additional, low cost, housing. The SHARP stimulus proposalxxxii calls for 10. Be combined with other regulatory and government investment for new build/ tax reforms to encourage multi tenure acquisitions and for the renovation of existing developments with build to rent homes. Commonwealth contributions should be 11. Over the longer term maximise tenant, complemented by state/territory governments in the community and economic outcomes. form of land and/or capital and local governments may also make a valuable contribution. The proposal suggests that SHARP would be administered by a new arm of the National The SHARP suggests the following strategic Housing Finance Investment Corporation (NHFIC) objectives: accountable to an oversight body reporting to 1. Increase the supply of social housing, National Cabinet. predominately via construction of new In an underperforming market there is an opportunity social housing including within mixed tenure to support additional homes coming online which developments will create multipliers in jobs and economic activity 2. New social housing to be primarily targeted as supported by SGS Economicsxxxiii. at households who are homeless or at risk of homelessness. Specific cohorts such as older single women may be prioritised Maintenance 3. Stimulate the building maintenance and Immediate repairs and maintenance programs can construction industry continue to be brought forward to keep improving the homes of our tenants to also stimulate economic 4. Support employment in regional and metro activity and jobs. Significant new housing coming areas across all Australia. We anticipate online in September can support social and activity will be predominantly in areas where affordable housing outcomes. New build activity unemployment has hit the hardest which provides 40 plus trades and subtrades with 5. Support the housing market by taking the work drives significant economic activity that can opportunity to acquire quality sites at keen support the growing numbers expected to need prices that either investor landlords or housing with some supports. developers wish to sell Maintenance could be broken up into State, 6. Upgrade social housing to enhance energy Federal and CHP contributions to provide proactive performance maintenance to activate tens of thousands of social and affordable homes.
Australian Affordable Housing Report F2021 43 BHC (Qld)
Repairs and upgrades might typically include: New Build • Kitchens / bathrooms PowerHousing Members have identified 3-5,000 • Structural works /repairs lots that could be developed with opportunities • Painting and aesthetic works to activate shovel ready projects and to work • Common area upgrades including lighting, power, with suitable Development Approval lots to see security (CPTED), painting developments mobilised. State, federal governments and CHP share the Upfront capital grants are the most effective and upfront costs, and in return the CHP acquires financially efficient method to fund social housing. a longer lease (eg. 20- 50 years) or a share of Availability payments (or enhanced rent subsidies) ownership. CHP then leverages cashflow for upfront while similarly can solve the issue they represent a work and for a subsequent new build program, as long term spread of funds that would be required cashflow grows in the later years (similar to the UK over the period of a mortgage cycle. Decent Homes Standard approach on transfers). There is also a role for shared equity (targeted at the Bringing forward the planned and proactive affordable market cohort) in the mix of dwellings maintenance would not just see thousands of should a future program be considered of value for homes renovated but would also see budgeted funding, that in essence is representative of a private money brought forward for new home delivery. sale that is missing from the market currently. CHPs also have a real potential to be a new demand group that supports social and affordable housing delivery in larger greenfield or infill developments.
44 PowerHousing Australia Shared Equity Option
We have witnessed an increased strain in of Australians who may need ongoing Australia’s housing market over the past few temporary support or options such as a months. These challenges don’t just affect the shared equity with the possibility for it to be individual, they affect our communities and only for a 3-5 year timeframe. cause long term damage to our social and • There are also a number of Australians that economic wellbeing. State governments are despite COVID-19 would like to get into a starting to see the scale of the housing issue new home and can look to take a 60-80 per in Australia and the already stretched supply. cent stake in a home through shared equity. Bendigo Bank through its Community Sector With the need to stimulate activity and provide Banking arm, are working through potential support for a short or longer term there are shared equity scenarios, such as a new home options being developed based on long buyer having the option to purchase a 60 per standing models to see shared equity rolled cent stake of a home in partnership with the out across Australia. government and or other organisations such as CHPs instead of having to provide a 20 per “There is clear need for more innovative cent up front deposit. thinking and responses not traditionally seen, such as our Shared Equity Program. We have seen shared equity programs run It’s these programs that can help strengthen with the assistance of the state government our communities. They support economic in parts of Australia and internationally with wellbeing by ensuring people are provided positive results and will present options to the access to safe and affordable housing which following needs: may never be available to them if these • With 180,000 home completions expected programs don’t get off the ground and get the at the end of June, and forecasts of only support they need. It’s time we start focusing 110,000 homes commenced in F2021 there on new stimulus and homeownership retention is potentially a need for those picking up the programs to prevent the possible damage keys to have short to long term options of caused by COVID-19 to the country’s housing support. market.” • 429,000 deferred mortgages today may see Andrew Cairns, CEO of Community Sector elevated levels of deferral beyond the wind Banking (Bendigo Bank) down of JobKeeper, there are a number
Australian Affordable Housing Report F2021 45 Case Study – Provision of new Affordable Housing, Box Hill Melbourne (2019-20)xxxiv
In June 2018, the State of Victoria introduced a Voluntary Affordable Housing Agreement. JLL’s Strategic Consulting team was able to assist in negotiations with W hitehorse City Council to obtain planning approval in line with Victoria’s Voluntary Affordable Housing Agreement.
Key outcomes: • 7 new dwellings sold to Women’s Housing Limited at a significant discount • WHL to hold the assets for at least 15 years • Heavily discounted body corporate fees
JLL’s value add: • Developer achieved greater density whilst providing much needed community benefits • Successfully brokered agreements between all parties to deliver more affordable stock into the market • Leveraged JLL’s broader industry relationships and networks across local and state government, and community housing providers • Demonstrated understanding of local and state government processes Watch the video to find out more: https://www.jll.com.au/en/client-stories/ negotiating-for-hf-property
Future Thinking – Affordable Housing Asset Class Investment Appetite for Construction
There is a global wave of capital looking to invest in investment in environmental social and governance Australian residential housing with strong support options which avoid the periodic volatility that is a from domestic and international investors for the characteristic of other investment classes. community housing sector which was evidenced in CHPs have embraced the current Federal and State June 2020 through the third bond issue. Since March government financial supports to deliver more social 2019, NHFIC has issued nearly $1.2 billion of social and affordable housing. However in doing so, CHPs bonds, making it the biggest issuer of social bonds in are looking at options to take on more debt and so Australia. Issuing the third NHFIC impact bond today now the real challenge is how to create sustainable, provides a boost for CHPs to channel low cost, long long term financing structures to enable CHPs to term finance into housing outcomes as we head into deliver more homes. As considered by BFIN partner, a time where more and more Australians will have Kirk Robinson, new Government financing support never needed the support more. even at a low level can and will encourage Australian With stock markets returning, there is a growing Superannuation funds and other local fund weight of capital that is looking for this type of managers to invest in this sector by partnering with long term, government backed, stable return CHPs to create more social and affordable housing.
46 PowerHousing Australia Longer Term Equity Potential Fund Structure In 2019, PowerHousing through its membership of There is potential for a longer-term fund to be the International Housing Partnership supported established to provide equity to co-invest in CHP by Paxon Group, considered the emergence of a social and affordable housing projects which global investment class for affordable housing.xxxv provides a stable recession proof return to This work identified that amongst other factors, superannuation members. there is a significant weight of institutional capital The fund would provide equity investments into social seeking quality, scaleable Environmental, Social and affordable housing projects, with a market-return and Governance (ESG) investments. The economic being earned commensurate with the risk profile of fallout of COVID-19 has also driven a greater focus the asset class. Together with already available debt on reliable yield investments with low volatility. These finance, this will be able to be leveraged to provide a factors further enhance the desirability of social and significant impact. The fund would be administered affordable housing as an investment proposition. through an appointed fund manager. It is envisaged that Superannuation is a long-term investment and periods NHFIC may be an appropriate custodian of the funds of negative returns are expected to occur from time to who would either act as the fund manager or appoint time. There is a lot of effort put into making sure fund appropriate fund managers on its behalf. members have diversified investment options as a buffer to volatility as pronounced as it is in 2020 which A role for Government is likely to be prolonged. Australian Super which has around 2 million It is acknowledged that in Australia, the social and members posted a .52 per cent return for the 2020 affordable housing asset class is still developing, and financial year. In regards to low and negative yield, in context of a two year COVID-19 recovery phase Australian Super CEO Ian Silk recently commented there is not yet sufficient volume of projects aligned “we generally say to members in a 20-year period with the asset class definition underway within you might expect four to five years of negative Australia to provide sufficient certainty to investors returns”xxxvi. as to the pipeline for investment. To address this, the Federal Government could take an active role As the economy grapples with COVID-19, it is likely in establishing the asset class which would also there will be greater appetite for those investment leverage other policy or funding commitments. classes that can ‘ride through recessions’ social housing investment has proven itself over the past The support could take two forms: 30 years. Despite the challenges of COVID-19, • Establishment funding to assist in the PowerHousing Australia’s membership have shown development and establishment of a fund and the stability across the first COVID quarter from March appointment of a fund manager; and to May with arrears and bad debts being stable or improving. • A small initial fund investment, to provide initial liquidity for the fund. It is expected that the fund In particular, this opens the door for Government to manager would then seek matched funding from incentivise social and affordable housing investment institutional sources. through longer term tax credits, government subsidy and grant/equity structures that will assist the This government investment is proposed as a throughput of the rental homes needed today, but to commercial investment, with the government also provide structure for the ongoing delivery of the investment made for a term. Once the fund has been rental homes that will be needed as we come out of established, and a track record of projects established the crisis in FY2021-F2022. which facilitates sufficient institutional investment, the Commonwealth would be able to exit the fund. Supporting renters in a model that is government- It is anticipated that this term would be five to seven backed will place a long-term base under the record years, allowing for establishment of sufficient projects. decline in housing commencements and stimulate Initial examination of the fund concept demonstrates affordable housing and jobs which will be expected viability to support a stable investment return. in the Federal Government’s ongoing response to the pandemic later in the year.
Australian Affordable Housing Report F2021 47 Role of CHPs Foundation Housing (WA) CHPs would take a lead role in identifying and progressing projects which access the fund. CHPs would assemble projects, including matching subsidy to outcomes using levers such as concessional land access, planning gains, tax concessions and (if and where available) revenue enhancement or support from Government. CHPs would arrange senior debt, most likely through banks or through NHFIC loans, to form part of the capital structure alongside equity from the Fund.
State Governments could be encouraged, through • generated direct construction jobs; engagement from CHPs and representative bodies, to • supported significant aspects of the retail sector; contribute land or facilitate land access (including on concessional terms where beneficial outcomes to the • turned casual employees into permanent State may be demonstrated). employees in the manufacturing and supply industries; While there are a variety of vital options to support the health and welfare of Australians today, there is • generated employment for new employees; and a need to work through the options for supporting • consequently contributed strongly to Australia’s the growing housing needs for those with uncertain unemployment rate peaking much lower than a housing futures and to also structure for new build majority of people feared. economic activity. The COVID-19 pandemic changes the dynamic of the private new home building sector in Australia. IN CONCLUSION The capacity for demand to meet housing supply is unknown. The demand for social housing does Understanding what will be an uncertain and exist, though, and supply of this housing can be unprecedented change in the housing market, achieved. There are over a million ‘workers’ who can rental conditions, and wage fragmentation is tough. be project managers, or subcontractors (tradies), Balancing a new market equilibrium, with immediate builders (most of them small business), that stimulate property stimulus, that feeds into longer term new manufacturers, suppliers, and retail businesses. build programs is tricky to get right. The June 2020 announcement of the Morrison Stabilising beyond the immediate six month rental Government’s HomeBuilder stimulus was welcomed policies/JobSeeker/JobKeeper phase in September to as vital to providing an economic support to an ailing create long term stabilisation is where Government’s residential construction industry. But forecasts of best efforts can be placed now. This requires longer a decimated housing market indicate social and term, 2-5 year thinking for people needing subsidised affordable stimulus will be required if the market just wage and housing if their job has been temporarily isn’t capable of taking up the offered stimulus. lost to the economic downturn. For the struggle which is far from over, Australians Stimulating the new home building market makes will place a new value on the house they have, and not considerable sense as it can restore confidence and take for granted that it is there forever. Hopefully we activity in the Australian economy. The experience of all will have a new empathy for those in less fortunate the GFC provides proof of this fact, where stimulus: circumstances.
48 PowerHousing Australia ABOUT THE AUTHORS
Tim Lawless Tim Lawless is widely regarded as one of Australia’s leading property market analysts and commentators by business and the media. Tim’s expertise across property markets has positioned him as one of the country’s most experienced and popular property market analysts and commentators. His knowledge and expertise is sought after by myriad government entities and regulators as well as national and international corporate entities operating across property, banking and financial sectors. About CoreLogic – CoreLogic Australia is a wholly owned subsidiary of CoreLogic (NYSE: CLGX), the largest property data and analytics company in the world. With Australia’s most comprehensive property databases, the company’s combined data offering is derived from public, contributory and proprietary sources spanning more than three decades of collection, providing detailed coverage of property information such as tenancy, location, hazard risk and related performance data. CoreLogic is the leading provider of property data, analytics and related services to consumers, investors, real estate, mortgage, finance, banking, insurance, developers, wealth management and government. CoreLogic delivers value to clients through unique data, analytics, workflow technology, advisory and geo spatial services. CoreLogic RP Data helps identify and manage growth opportunities, improve performance and mitigate risk.
Nicholas Proud Nicholas Proud is the CEO of PowerHousing Australia. He joined the organisation in 2016 and has supported the Federal Budget establishment of a bond aggregator and the National Housing Finance and Investment Corporation. Nicholas previously has worked in senior Executive Director capacity with the Property Council of Australia, Housing Industry Association and the Construction & Property Services Industry Skills Council, to undertake housing outlooks and environmental scans over the last decade. About PowerHousing Australia – PowerHousing Australia is a unique forum for peer-to-peer exchange and collaboration amongst housing professionals who are dedicated to improving lives through the provision of social and affordable housing. The organisation was established in 2005 by a group of CEOs who recognised the scale of emerging housing affordability issues and the enhanced capacity of organisations to make a difference if they collaborated to share knowledge and resources. Today the organisation has 36 of the largest scale community housing provider members who collectively manage over $20 billion in housing, and own or manage over 72,000 homes for over 120,000 people on low to moderate incomes.
Australian Affordable Housing Report F2021 49 OTHER CONTRIBUTORS
Harley Dale Harley Dale is currently Principal at HDD Consulting, providing independent economic advice. This follows on from fourteen years at HIA Economics (including ten years as Chief Economist) and roles outside this time in skills, immigration and workforce development. During Harley’s time as Chief Economist, HIA Economics firmly positioned itself as a leading forecaster of housing activity in Australia. Harley has worked in a wide range of economics - related roles throughout his career, including financial markets (with Westpac and CSFB), academia and extensive media engagement.
PowerHousing appreciates the following contributions to the report.
Residential construction: Simonds Homes, Metricon, AVJennings, D&J Crawford Builders, Architecture and Access, Office for Collective Design
Manufacturing and Retail: CSR PGH Bricks, Dulux, James Hardie, Timbertruss, Eaves, Allume Energy, Harvey Norman Commercial, Karndean Design Flooring
Property: JLL, Property Safe
Finance: Community Sector Banking (Bendigo Bank), ANZ, BFIN
CHP: Access Housing (WA), Accessible Housing (NZ), Beyond Housing (VIC), BHC (QLD), CHC Australia (ACT), City West Housing (NSW), Foundation Housing (WA), Haven: Home, Safe (VIC), Housing Choices (VIC), HousingFirst(VIC), Housing Plus (NSW) Housing Trust (NSW), Hume Community Housing (NSW), Junction Australia (SA), Link Housing (NSW), SGCH (NSW), Southern Cross Housing (NSW), Westside Housing Company (SA), Unison (VIC), Unity Housing (SA), Womens Housing (VIC), YWCA National Housing (NAT).
Unity Housing (SA)
50 PowerHousing Australia 06 Appendix One SIMONDS HOMES BYFIELD DESIGN
Australian Affordable Housing Report F2021 51 52 PowerHousing Australia METRICON BARTON DESIGN
Australian Affordable Housing Report F2021 53 07 Appendix Two
Foreign Investment Review Board – Foreign Investment Approvals
Foreign investment approvals in residential real estate in new delivery that pushed the commencement have plummeted from 40,141 approvals in 2015-16 to rates of new housing supply to record levels. Most of 10,036 approvals in 2017-18, down from $72.4 billion the approvals granted in 2017-18 were for potential in approvals to $12.5 billion over the same period. purchases in Victoria and New South Wales where population growth remains strong. China and the This represents a reduction of $59.9 billion in the United States remain the largest foreign investors in value of Foreign Investment Review Board approvals. Australia’s real estate market. Although it must be noted that not all investment approvals translate into actual purchases of dwellings, Although this steep reduction in Chinese investment these figures suggest a huge decline in demand in may be in part due to reduction in demand for residential real estate from foreign buyers particularly Australian property, China has also put restrictions in the new residential space. on the amount of capital flowing out of the country, whilst the Australian Federal Government as well as There is a significant drop from two years earlier from the banks have also tightened rules around lending to $65 billion in approvals for new dwellings down to foreign investors. $10 billion which represents the massive investment
Foreign Investment Approvals 2018-19
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
No. $b No. $b No. $b No. $b No. $b No. $b
Developed 7,920 7.5 9,247 11.5 5,877 7.3 2,008 3.0 1,615 2.4 1,313 1.8
For Development 18,284 29.0 27,594 49.2 34,264 65.2 11,190 27.1 8,421 10.2 6,074 12.9
Total 26,204 36.5 36,841 60.7 40,141 72.4 13,198 30.1 10,036 12.5 7,513 14.8
Source: Foreign Investment Review Board, 2018-19 Annual Report
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Australian Affordable Housing Report F2021 55 CHC Australia (ACT) Downer Development
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